Budget 2016: FM gives ailing Air India a shot in the arm; allots Rs 1,713 crore

New Delhi: National carrier Air India, which is expected to slash its net losses by around 40 per cent this fiscal, will receive Rs 1,713 crore government funding for the next fiscal.

In the Union Budget for the 2016-17 financial year, presented by Finance Minister Arun Jaitley in Lok Sabha on Monday, the Government-run carrier has been allocated Rs 1,713 crore as part of the Rs 30,0231 crore financial bailout package.

The total outlay for the Civil Aviation Ministry stands at Rs 4,417 crore for the fiscal 2016-17.

 Budget 2016: FM gives ailing Air India a shot in the arm; allots Rs 1,713 crore

Air India. PTI

Organisation such as Airports Authority of India, Directorate General of Civil Aviation, Pawan Hans Ltd, Bureau of Civil Aviation, among others, come under the Civil Aviation Ministry.

Significantly, Air India had earlier this year sought Rs 4,300 crore worth funds from the government for the financial year, starting April 1, 2016 amid its turnaround plan and stiff competition.

The airline is surviving on a Rs 30,231 crore bailout package extended by the previous UPA government in 2012 for a period of up to March 31, 2021. Under the Turnaround Plan (TAP), which runs till March 2021, it has already received Rs 22,280 crore including Rs 3,300 crore in the ongoing fiscal.

Minister of State for Civil Aviation Mahesh Sharma had last week said that Air India losses were expected to come down by 40 per cent to Rs 3,529.80 crore by March this year. The airline had in the financial year ended March 31, 2015, reported a net loss of Rs 5,859.91 crore.

However, its debt burden stood at Rs 51,367.07 crore, including Rs 22,574.09 crore outstanding on account of aircraft loans, in the previous financial year.

Air travel to become expensive

Fliers will have to shell out more with the government proposing a hike of 6 per cent in excise duty on jet fuel but it would not be applicable to the proposed Scheduled Commuter Airlines (SCAs) under the regional connectivity scheme.

The excise duty on ATF is to be hiked to 14 per cent from 8 per cent, according to a proposal in Union Budget 2016-17.

The increase would be virtually applicable to airlines operating from all airports since the proposal for SCAs and the regional connectivity scheme are yet to be implemented.

The Civil Aviation Ministry has mooted the idea of SCAs and regional connectivity in the draft aviation policy which has not been finalised yet.

"Excise duty on ATF, other than for supply to Scheduled Commuter Airlines (SCA) from the Regional Connectivity Scheme Airports, (is) being increased. ATF for supply to aircrafts under the Regional Connectivity Scheme will continue to attract 8 per cent excise duty," Finance Minister Arun Jaitley said while presenting the Budget.

Interestingly, the hike in excise duty also comes at a time when airlines have been seeking lower levy on jet fuel, which accounts for more than 40 pr cent of their total operating expenses.

"Increase in excise duty on ATF will make the raw material costlier by around 4-5 per cent. At a time when ATF in India
is 60-70 per cent costlier than global ATF prices, it goes against the government's stated objective to make flying
affordable for the masses", Amber Dubey, partner and head-aerospace and defence at global consultancy KPMG said.

Currently, jet fuel prices vary from state to state depending on the Value Added Tax levied by them.

Meanwhile, the government's latest move announced also indicates that there would be changes in proposals made in the
draft civil aviation policy.

As per the draft policy, ATF drawn by SCA's from the regional connectivity scheme airports shall be exempt from excise duty.


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Updated Date: Feb 29, 2016 16:59:33 IST